While the euro regime is facing strains due to the Greek tragedy, India has a serious bank NPA crisis to deal with
Recently, KPMG conducted a global CEO outlook survey. As many as 1278 CEOs were covered. They responded from the United Kingdom, Germany, Italy, the US, Australia, France, India, Japan, China and Spain. The responses lent themselves to some clear clusters. Of them, six were dominant.
They were: Need for transformation; customer-oriented strategy; funding growth and managing risk; organic growth; technology as a differentiator; people transformation. Perhaps it’s arguable that there is nothing new about these blocks. What is new, however, is that the vantage point of perception is 2014-15 and the geography is as outlined above. The CEO survey is important and helps to benchmark. And that is another story.
Such surveys cannot possibly cover all the countries, and there are bound to be exceptions. Greece was a notable exception.
Greek tragedy is widely referred to in literature. Well might it be asked why, in literature, there is no reference to a German tragedy or an Italian tragedyIJ The bald truth is that, what happens, and all historical truths, cannot be logically explained.
Put simply, tragedy is about ‘fate’. It is a close cousin of the Greek wordananke . It means force even more powerful and merciless than gods. There lies the answer of economic forces which at times appear incomprehensible.
The ground condition is clear. If the European Union were to stretch from lisbon to Helsinki, then it would be the limit of unrealistic expectation coming true. So be it.
Many such CEO surveys, as the one referred to earlier, are required. This would need further more efforts from many sides. The attempt by KPMG to follow-up the survey by creating groups of stakeholders to discuss the findings of the survey, is entirely welcome.
Getting back to the lights of the corporate, some myths have to be nailed.
Greece’s exit from Europe would not have destroyed the single currency regime. It would have only flagged the collapse of a broader European concept. The fact of the life is that many of our CEOs do not register this broader socio-economic reality. We need to remind ourselves that the official credit now holds almost all of Greek’s sovereignty debt. The exposure of Europe’s financial system to developments in Greece is manageable.
It is in India that we are facing a much bigger threat. The dramatic context of that is not fully registering yet. The gross non-performing assets of banks have crossed the three-lakh-crore-rupee mark. Just one suit for recovery through the debt recovery tribunal would take more than five years to be settled!
In the Indian financial scene, another pet theme is the talk of interest rates. If we get back to Greece the possibility of panicking investors sending interest rates spiralling is much higher. In Europe, the sovereign debt of the heavily in-debt euro zone countries can be squarely met by the European central bank which can stabilise the markets through various measures, including buying those countries’ bonds.
But many CEOs do not understand finance. Several corporates in India survive on being chummy with the Government. This is often reflected in their getting cheap land and loan. The Economist has estimated that half of all billionaire wealth in Asia has been made in sectors such as property. This is prone to cronyism. Compare this with 15 per cent in the West.
Innovation is constantly mouthed but systematically neglected in Asia. The great car champions from India and China, like Mahindra & Mahindra and Great Wall, had a combined R&D budget that is three per cent that of Volkswagen’s.
The CEO survey of KPMG is a good beginning. It can be a welcome trigger for unearthing many unfashionable truths. Every day, hundreds of appeals are filed, with judgement to be delivered in 120 days. It’s one more case of the wide gap between regulations and reality.
In 2002, the Securitisation and the Construction of Financial Assets and Encroachments of Security Interest Act (Sarfaesi) was passed. Concurrently, Debts Recovery Tribunal were given exclusive jurisdiction to attend to appeals under Sections of the act.
Perhaps the beginning of the end is close. A pattern is being set for the empirical fact-finding of the ground conditions as they exist, outside the Government prism on data.